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South Asia Investor Review is focused on reporting, analyzing and discussing the economy and the financial markets of countries in South Asia, including Pakistan, Bangladesh and Sri Lanka. For investors looking to invest in emerging markets beyond BRIC countries (Brazil, Russia, India and China), this blog is designed to help international investors looking to learn about investing in South Asia with focus on Pakistan. Riaz has another blog called Haq's Musings at http://www.riazhaq.com

Trump Inauguration; WEF17 & Inequality in India

What tone did President Donald J. Trump set in his inauguration speech on Jan 20, 2017? Can Trump simultaneously take on the US establishment, friends and foes all at the same time? How will he browbeat US businesses to stop offshoring of manufacturing and jobs? How will he "eradicate radical Islamic terrorism" without the help of allies whose armies he says will not be "subsidized" by the United States? How's Trump's rise seen in Pakistan? Will he start trade wars with China and other countries running trade surpluses with the United States? Will he change Washington or will Washington change him?

Why is the World Economic Forum 2017 in Davos so concerned about growing economic inequality? Is globalization alone responsible for it? Why is India so unequal with 58.4% of the wealth owned by the top 1% of Indians? Why have the Brexit vote and Trump victory sent shockwaves through the ranks of the owners/investors of global businesses and industries? How will they respond to the powerful backlash against globalization? How is automation affecting the jobs situation? Is it equally responsible for loss of jobs?

Why was the new Laskar e Jhangvi chief Asif Chhotu, like his predecessor Malik Ishaq, killed in a police encounter in Punjab? Was this just another fake encounter? Will it help reduce sectarian carnage in Pakistan?

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The (World Bank) report ( The State of Social Safety Nets 2015) – which identifies India as a “lower middle income group” country – finds that all other BRICS countries, except China, spend a higher proportion of funds on social safety net. Thus, Brazil spends 2.42 per cent, Russia 3.30 per cent, China 0.70 per cent, South Africa 3.51 per cent, and South Africa 3.51 per cent of GDP. Interestingly, even the two of India’s neighbours – Pakistan and Bangladesh – spend a higher proportion on social safety net, 1.89 per cent and 1.09 per cent. The report says, “Despite having fewer resources for social safety nets, some lower-income countries allocate considerably more funds than the 1.6 percent average for developing countries”.

#India has been a post-truth society for years. #Modi #Trump #alternativefacts http://theconversation.com/india-has-been-a-post-truth-society-for-years-and-maybe-the-west-has-too-71169 … via @_TCGlobal

India: home of post-truth politics

That was the global context of post-truth politics and its advent in the West. But as the US and UK wake up to this new era, it’s worth noting that the world’s largest democracy has been living in a post-truth world for years.

From education to health care and the economy, particularly its slavish obsession with GDP, India can be considered a world leader in post-truth politics.

India’s post-truth era cannot be traced to a single year – its complexities go back generations. But the election of Narendra Modi in 2014 can be marked as a significant inflection point. Ever since, the country has existed under majoritarian rule with widely reported discrimination against minorities.

India’s version of post-truth is different to its Western counterparts due to the country’s socioeconomic status; its per capita nominal income is less than 3% of that of the US (or 4% of that of the UK). Still, post-truth is everywhere in India.

It can be seen in our booming Wall Street but failing main streets, our teacher-less schools and our infrastructure-less villages. We have the ability to influence the world without enjoying good governance or a basic living conditions for so many at home.

Modi’s government has shown how key decisions can be completely divorced from the everyday lives of Indian citizens, but spun to seem like they have been made for their benefit. Nowhere is this more evident than with India’s latest demonetisation drive, which plunged the country into crisis, against the advice of its central bank, and hit poorest people the hardest.

Despite the levels of extreme poverty in India, when it comes to social development, the cult of growth dominates over the development agenda, a trend that Modi has exacerbated, but that started with past governments.

The dichotomy of India’s current post-truth experience was nicely summed up by Arun Shourie, an influential former minister from Modi’s own party. He disagrees with the prime minister, just as many Republicans share sharp differences of opinion with President Trump.

Shourie said the policies of the current administration were equal to his predecessors’ policies, plus a cow.

------------...there is an argument to be made that the US and the UK have been living in denial of facts and evidence for years. In 2003, after all, both the countries went to war in Iraq over the false notion that Saddam Hussein was harbouring weapons of mass destruction.---------------Major social change does not happen within the space of a year. Yet, to a large number of observers around the world, the “post-truth” phenomenon seemed to emerge from nowhere in 2016.

Two key events of 2016 shaped our understanding of the post-truth world: one was in June, when Britain voted in favour of leaving the European Union. The other was in November, when political maverick Donald Trump was elected the 45th President of the United States of America. Trump’s administration spent the third day of his presidency speaking of “alternative facts”, and making false claims about the size of the crowds that had attended his inauguration.

For the rest of the world, the importance of both Trump and Brexit can best be gauged by understanding that they happened in the USA and in the UK. The UK was the key driving force of the world from the 19th century until the second world war, the US has been ever since. The US and the UK often have shared a similar point of view on many global geopolitical developments, as strategic allies or by virtue of their “special relationship”.

The data shows that the United States exported $1.8 billion in goods to Pakistan in 2015, creating or supporting over 9,200 US jobs. As one example, General Electric won a contract this year to provide 55 locomotives to Pakistan Railways, all of which will be manufactured at Erie in Pennsylvania.

The data reveals that foreign direct investment from Pakistan to the United States in 2015 supported up to 1,000 additional US jobs.

"Let me save the government some money and offer up the data right now," he (Fareed Zakaria, CNN GPS) said, quoting a study by Alex Nowrasteh of the CATO Institute, a conservative think tank that has tallied the number of Americans killed on US soil from 1975 to 2015 by citizens of the seven countries."Iraq - zero, Iran -zero, Syria - zero, Yemen - zero, Libya - zero, Somalia - zero, Sudan -- zero," Zakaria said.As to how these particular countries were chosen, Zakaria said it was "truly mysterious," before observing that "none of the Muslim majority countries that have a Trump hotel, building or office are on the list.""There is really no rational basis for this ban," he said, before adding that it could only be explained by looking at what he considered to be the hallmark of Trump's political career: "the exploitation of fear.""From the birther campaign to the talk of Mexican rapists, Trump has always trafficked in fear mongering," Zakaria said.To "present himself as the country's protector," Trump had chosen to "punish ordinary men, women and children who are fleeing terrorism and violence," Zakaria said."These people are the roadkill of Trump's posturing," he added."The image, reputation and goodwill of the United States of America as the beacon of the world" was destroyed by the executive order, Zakaria said."Donald Trump seems to want to turn off that lamp on the Statue of Liberty."

Days after the Pentagon announced it is withholding $50 million intended for Pakistan as part of its Coalition Support Fund, the South Asian country's ambassador hinted at potential retaliation, possibly coaxing Washington to negotiate access to the country's air corridors, which Islamabad suggests have been taken for granted.

Pakistan is ready to cooperate with the United States, Ambassador Aizaz Ahmad Chaudhry said, though Washington may now end up having to negotiate with Islamabad on the corridors and other tangible assets, he added.

"All that Pakistan has done in the fight against terrorism has not been sufficiently factored" into the U.S. decision to reduce its support funds, Chaudhry lamented during a discussion this week at the Washington office of the London-based International Institute for Strategic Studies.

Air rights up for negotiation?

Pakistan has facilitated air and ground logistical support for U.S. troops in Afghanistan "like no one else," Chaudhry said, adding that "since 2001, all air corridors from Pakistan have been available to the United States free of cost."

The reason Pakistan did so "was because we believed this was a common war," the ambassador said, but there have been occasions when U.S. actions have left his country's leaders thinking "that perhaps we are not partners."

Questions concerning Pakistan's commitment to bilateral partnership have also been raised by the U.S. A prime example was the discovery in 2011 that al-Qaida leader Osama Bin Laden had been living undisturbed near a key Pakistani military facility.

U.S. Secretary of Defense Jim Mattis said he withheld $50 million in Coalition Support Funds because he couldn't certify to Congress that Pakistan had taken sufficient action against the Haqqani network, a Taliban-associated organization which the U.S. has deemed a Foreign Terrorist Organization, since September 2012. The group has been blamed for attacks in Afghanistan, which have contributed to the country's destabilization, an issue of concern to the U.S.

For its part, Islamabad's message is don't drop "every security lapse in Afghanistan on Pakistan's doorsteps," as the country's ambassador to the U.S. put it.

The Pakistani envoy's remarks came at a time when U.S. President Donald Trump's administration has been reviewing its overall strategy toward South Asia, including India, Pakistan, Afghanistan and Iran. And his defiant tone may reflect Pakistan's decreasing dependence on the United States amid an influx of Chinese capital investments and a strengthening political relationship between Islamabad and Beijing.

For all the talk of wanting to tap the middle class, no firm moving into India thinks it is targeting the middle of the income distribution. India’s mean GDP per head is just $1,700, and 80% of the population makes less than that. Adjust for purchasing-power parity by factoring in the cheaper cost of goods and services in India and you can bump the mean up to $6,600. But that is less than half the figure for China (see chart 2) and a quarter of that for Russia. What is more, foreign companies have to take their money out of India at market exchange rates, not adjusted ones.

Defining the middle class anywhere is tricky. India’s National Council of Applied Economic Research has used a cut-off of 250,000 rupees of annual income, or about $10 a day at market rates. Thomas Piketty and Lucas Chancel of the Paris School of Economics found in a recent study that one in ten Indian adults had an annual income of more than $3,150 in 2014. That leaves only 78m Indians making close to $10 a day.

Meagre market

Even adjusting for the lower cost of living, that is hardly a figure to set marketers’ heartbeats racing. The latest iPhone, which costs $1,400 in India, represents five month’s pay for an Indian who just makes it into the top 10% of earners. And such consumers are not making up through growing numbers what they lack in individual spending power. The proportion making around $10 a day hardly shifted between 2010 and 2016.

Another gauge is whether people can afford the more basic material goods they crave. For Indians, that typically means a car or scooter, a television, a computer, air conditioning and a fridge. A government survey in 2012 found that under 3% of all Indian households owned all five items. The median household had no more than one. How many of them will be anywhere near able to buy an iPhone or a pair of Levi’s if they cannot afford a TV set?

To get in the top 1% of earners, an Indian needs to make just over $20,000. Adjusted for purchasing-power parity, that is a comfortable income, equating to over $75,000 in America. But in terms of being able to afford goods sold at much the same price across the world, whether a Netflix subscription or Nike trainers, more than 99% of the Indian population are in the same league as Americans that count as below the poverty line (around $25,000 for a family of four), points out Rama Bijapurkar, a marketing consultant.

The top 1% of Indians, indeed, are squeezing out the rest. They earn 22% of the entire income pool, according to Mr Piketty, compared with 14% for China’s top 1%. That is largely because they have captured nearly a third of all national growth since 1980. In that period India is the country with the biggest gap between the growth of income for the top 1% and the growth of income for the population as a whole. At the turn of the century, the richest 10% of Indians made 40% of national income, about the same as the 40% below them. But far from becoming a middle class, the latter’s share of income then slumped to under 30%, while those at the top went on to control over half of all income (see chart 3).

#Pakistan has the highest intergenerational income #mobility and the lowest #inequality among emerging economies. #WEF2018 #Davos https://www.weforum.org/agenda/2018/01/economist-plan-to-heal-fractured-societies/ …

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San Francisco based Cloudcade has announced it will invest $6 million to set up a game development studio in Lahore, Pakistan, according to Venturebeat.

The Lahore studio will be led by Ammar Zaeem, cofounder of Pakistan’s mobile game studio Caramel Tech which already has a team of 50 engineers.
The move is a big investment into Pakistan as a tech hub, and it shows how the game business is expanding around the globe.

Cloudcade:

Founded by Di Huang in 2013, Cloudcade is known for its popular multiplayer game "Shop Heroes" that pits players against each other in a competition to create the best shop they can. If a player can make a better store and perform more tasks than his or her rivals, he or she wins.

The game is available on the Apple iOS App Store, Google Play, Samsung Galaxy Store, Amazon, Kongregate, and Facebook. It is now also supported on the Apple Watch.

43.5% of Indians, the highest percentage in the world, say they do not want to have a neighbor of a different race, according to a Washington Post report based on World's Values Survey.

About Pakistan, the report says that "although the country has a number of factors that coincide with racial intolerance – sectarian violence, its location in the least-tolerant region of the world, low economic and human development indices – only 6.5 percent of Pakistanis objected to a neighbor of a different race. This would appear to suggest Pakistanis are more racially tolerant than even the Germans or the Dutch".

Housing Discrimination:

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Pakistan's human development ranking plunged to 150 this year, down from 149 last year. It is worse than Bangladesh at 136, India at 130 and Nepal at 149. The decade of democracy under Pakistan People's Party and Pakistan Muslim League (Nawaz) has produced the slowest annual growth rate in the last 30 years. The fastest growth in Pakistan human development was seen in 2000-2010, a decade dominated by President Musharraf's rule, according to the latest Human Development Report 2018.

Human Development in Pakistan:

UNDP’s Human Development Index (HDI) represents human progress in one indicator that combines information on people’s health, education and income.

Pakistan saw average annual HDI (Human Development Index) growth rate of 1.08% in 1990-2000, 1.57% in 2000-2010 and 0.95% in 2010-2017, according to Human Development Indices and Indicators 2018 Statistical Update. The fastest growth in Pakistan human development was seen in 2000-2010, a decade dominated by President M…

I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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